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ICS Commentary - U.S. Employment Cost Index, Q1 2014

Released April 30th 2014, the U.S. Bureau of Labor Statistics' 12-month Employment Cost Index (ECI) reversed course this quarter, slipping to 1.8 percent. It had risen to 2.0 percent in the last quarter of 2013.

"With the exception of Q2 - 2011, the 12-month growth rate of U.S. compensation costs has stayed in a tight band between 1.7 and 2.0 for four years now," says Linda Barrington, Executive Director of Cornell's Institute for Compensation Studies in the ILR School. "This quarter's softening in the ECI means we will likely stay in this pattern for most if not all of 2014," she added.

In terms of both timing and substance, the reported Q1-2014 deceleration of compensation costs for U.S. civilian workers comes hand-in-hand with the U.S. Bureau of Economic Analysis' advance estimate of quarterly Gross Domestic Product (GDP). Also released April 30th 2014, real GDP – themeasure of all goods and services produced within in the United States – grew at an annual rate of just 0.1 percent in the first quarter of 2014. Combined, these two indicators (ECI and GDP) send a strong signal of tepid
economic expansion in the first quarter of 2014.

Turning the focus to private sector employees by occupation and industry, the Leisure and Hospitality sector is the only of the eight tracked groupings to record acceleration in the 12-month Employment Cost Index for wages and salaries.

"For the first time in nearly two years, Leisure and Hospitality is not at the bottom in terms of compensation cost increases over the 12 previous months," comments Barrington.

The Employment Cost Index (ECI) released April 30, 2014 by the U.S. Bureau of Labor Statistics reflects trends in the costs to employers for the wages and benefits they provide to their workers. The ECI is one of the labor market indicators used by the Federal Reserve Board to monitor the effects of fiscal and monetary policies and is released quarterly.